Where do you have your money saved for getting higher interest?

tx_tx

https://www.boards.ie/discussion/comment/120914182#Comment_120914182

Also, the taxation information that they give, and the fact that you need to sign a document for the borrowing bank to waive the withholding tax, both indicate that the account is in your name indeed. If the money was pooled and interest paid to Raisin before being redistributed to depositors, taxes would work differently.

Jim2007

https://www.boards.ie/discussion/comment/120940043#Comment_120940043

Do not draw any conclusion on this kind of stuff, there is too much at stake on this kind of think for people to be making decision no a hunch.

tx_tx

https://www.boards.ie/discussion/comment/120940534#Comment_120940534

I don't want to rush to conclusions, but I mean, what else could it be?

Tax treaties work in a certain way, and if I, as a depositor, can get a foreign bank to waive a withholding tax, it is that I'm the depositor from their perspective. If there was a middleman pooling the money, interests would be paid first to a foreign company (Raisin), and the tax treatment is entirely different. And then I would get an interest paid by Raisin which is - I'm not actually sure - either an Irish or a German bank. If Irish, they'd have to apply DIRT, and if German, they'd apply the same treatment regardless of which third party bank is behind - and that's not the case, tax treatment depends on the third party's country.

howiya

https://www.boards.ie/discussion/comment/120940951#Comment_120940951

Raisin is neither an Irish or German bank. It is an intermediary not a bank.

Sorolla

i invest in bonds that are going to mature in the next 6 or 9 months

Jim2007

https://www.boards.ie/discussion/comment/120940951#Comment_120940951

When it comes to the liquidation of any institution in almost any jurisdiction, there is a very simple rule applied in deciding if you will receive back all you are entitled to or a percentage - if the asset is clearly identified you get it back, if not then you join the common creditors and will receive a percentage of the remaining assets after the funds have been returned to the specific creditors.

Banks sell financial products, there is no such thing as a generic depositor. Every product has it's own characteristics and target audience and it is the job of the bank advisor to sell those products to you and in some cases he many not even fully understand exactly what he is selling you. Because of this, they are required to disclose a lot of information to you. And it is up to you to ensure you understand the product your are buying.

When we talk about the Bank Guarantee scheme, we are talking about a scheme that guarantees very specific financial products, where there is very clear identification of asset ownership. If you are going to put a significant amount of your savings on deposit with any financial institution, then it is up to you to ensure you know what you are doing by not make assumptions and relying on factual information only. If you don't understand the product, then don't buy it, because honestly, nobody else is going to care very much but you.

In the financial world return is always associated with risk, the higher the risk the greater the return and nobody pays you a higher return that they need to. So if your are being offered a higher rate of interest than what you might expect to get from an Irish bank, then it is a red flag indicating that you need to look at it carefully and make sure you understand the risks your are taking on.

As for the tax situation, banks have tax experts on hand who's job it is to optimise the tax treatment of a product in favour of the customer group the product is being targeted at. And unless you fully understand what they have done, you can't simply draw conclusions, put your money done and hope it is all going to work out OK.

This is why there are so many of these discussions going on - people are trying to make sure they fully understand the products they are buying and the risks they are taking on before they put down a large portion of their hard earned savings. And rightly so, most are not going to settle for assumptions in doing so.

Jim2007

https://www.boards.ie/discussion/comment/120942199#Comment_120942199

These are commonly referred to as money market products and although the risk of a default is low, it is still higher than a simple deposit account, so the return should be higher and of course depending on how those products have been constructed they may include synthetics.

JTMan

https://www.boards.ie/discussion/comment/120942195#Comment_120942195

Raisin is a bank with a banking licence. It acts as an intermediary.

tx_tx

https://www.boards.ie/discussion/comment/120942195#Comment_120942195

I think it's a German bank.

They give you an IBAN, and they have this BIC: MHBFDEFFXXX.

They acquired a tiny bank in order to get its banking licence. Having a licence was required for them to access certain markets within the EU (Ireland, Belgium, maybe others).

tx_tx

https://www.boards.ie/discussion/comment/120942754#Comment_120942754

Thanks, I certainly assumed that a depositor was a depositor. Good to know, even if I'm not sure I'm capable of using that knowledge :)

In terms of fully understanding what you're investing in, I know you're right in theory but in practice people including myself only understand what they're investing in to a certain degree. If you had to fully understand any investment ... in fairness if I followed this rule strictly I couldn't have anything, not a current account, not even Euro bills.

But of course if there's something I didn't understand, then obviously it's going to be my problem.

Typically, very few people understand the nitty gritty of Bank Guarantee schemes, yet this plays a significant role in how the general public invests their savings. They trust that it's an acceptable risk, even if they have no idea what that risk actually is.

In relation to risk, there is a high correlation between risk and reward, but not a perfect one. That would assume a number of things that aren't perfect in reality : full information, investments decisions based on risk/reward alone (not on marketing, misconceptions, biases, and for institutional investors requirements to invest in AAA or whatever), liquidity and size of the market as well, all can play a role in the reward you get for a given risk.

As a retail investor, it can be interesting to look at the sort of investments that are dismissed by big players for a variety of reasons other than risk. You're not going to double your ROI with this, but every little helps.

Jim2007

In terms of fully understanding what you're investing in, I know you're right in theory but in practice people including myself only understand what they're investing in to a certain degree. If you had to fully understand any investment ...

Typically, very few people understand the nitty gritty of Bank Guarantee schemes, yet this plays a significant role in how the general public invests their savings. They trust that it's an acceptable risk, even if they have no idea what that risk actually is.

In my experience this not correct the majority of either understand the products they are using of products they are using or they appreciate that they don't know and will seek independent advice before risk a large block of their savings in a financial product.

As a retail investor, it can be interesting to look at the sort of investments that are dismissed by big players for a variety of reasons other than risk. You're not going to double your ROI with this, but every little helps.

This is simply not true. I don't know where you are getting this from but it sounds very much like a sales pitch or something similar.

We have not gone as far off topic as were going to go.

MOD: If you have a specific question on the type of product being discussed here - high interest deposits, then fine. Otherwise take it to the investing forum, where not doubt there will be plenty to discuss it with you.

tx_tx

https://www.boards.ie/discussion/comment/120944508#Comment_120944508

I take your remark as borderline insulting. I have nothing to sell and I'm certainly not pitching anything. I was making a general observation that assuming a perfect risk/reward correlation was a helpful rule of thumb for the general public, but not a universal truth.

I can answer your claim of it not being true, and elaborate on where I'm getting this from. I won't do it in this thread as you're judging this is off-topic, but I'm happy to answer your point in DM if you care.

Saudades

https://www.boards.ie/discussion/comment/120942199#Comment_120942199

https://www.boards.ie/discussion/comment/120942768#Comment_120942768

Bonds and money markets both seem quite difficult to acquire. Seemingly way above my level of understanding. But I would like to research more. Presumably bonds offer lower risk but lower yield, and money markets offer higher risk but higher yield?

Sorolla, are you referring to NTMA government bonds? What was your yield like? Think I read elsewhere that you can only buy them through execution only brokers with rather high fees. Where's a good starting place to learn more?

Jim, what is your wise opinion on synthetic (unfunded swap) money market exchange traded funds?

Jim2007

Jim, what is your wise opinion on synthetic (unfunded swap) money market exchange traded funds?

As you pointed out, bonds and similar instruments are difficult to acquire especially as they reach maturity because insurance companies and other public entities are limited to holding them as investments in certain situations. And this is why some funds use synthetics, lack of availability.

If it were me, I would not use a fund whose mandate includes the use of synthetics in money market products. You go from a deposit account to a money market product in seeking a slightly better return for taking a slightly higher risk. And the risks you are intending to take on is the risk of a default which is very low in government or blue chip bonds. If you go with a fund using synthetics, you add the risk of the manager not being able to replicate the return and an unquantifiable risk in the event of a default because you may no claim at all on the bond issuer, since it may have been substituted with some other bond or some other weird and wonder thingy the mathmods [It seems the new name is Financial Engineers, who knew] came up with.

The best advice is alway keep things simple and if you can't understand a product either find someone who will explain it to you or just pass on it.

NewbridgeIR

Have most of my savings in Prize Bonds. I haven't won more than €50 yet.

tx_tx

https://www.boards.ie/discussion/comment/120950085#Comment_120950085

That's essentially a lottery. Are they making the odds public, so that you can make an informed decision?

Geuze

https://www.boards.ie/discussion/comment/120947752#Comment_120947752

Irisg Govt bonds can be bought on DeGiro, commission is 3 euro.

I bought zero-coupon bonds to get a tax-free and risk-free return of 2.7% approx.

Geuze

https://www.boards.ie/discussion/comment/120951780#Comment_120951780

Currently 0.35%.

Jim2007

https://www.boards.ie/discussion/comment/120951859#Comment_120951859

Bonds have their own risk profile and it is very important that people under stand the risks involved because people do loose money on bonds and often more than on equities, mostly because people do not intend to hold them to maturity.

tx_tx

https://www.boards.ie/discussion/comment/120951868#Comment_120951868

So, that's the total yield of all prize bonds. But it's distributed between (looking at this week) 1x €50k win, 4791x €50 wins, and others in between. I haven't done the maths, but that means most people will win less than 0.35% of their holdings, so that jackpots can be paid.

According to the Irish Times, " The odds of someone with €25 worth of bonds winning the top prize in any draw have been estimated at around 141 million to one. About the same as the odds against winning the Euro Millions lottery and considerably worse than the 10.7 million to one against winning the Irish Lotto. "

Assuming you're putting in a significant amount of money, the number of small wins you can expect become somewhat predictable and could be seen as an interest of 0.xx% (less than 0.35), plus a lottery element, which is your tiny chance of winning big.

If that's the sort of things you want to do, you'd be better off getting a 1.5% return from state savings or something similar, and buying actual Euro Millions or Lotto tickets with a part of the proceeds.

Henry Ford III

https://www.boards.ie/discussion/comment/120942885#Comment_120942885

So in the event of a default which deposit guarantee applies? Is it Raisin's or the institutions into which it has transferred the funds?

As always be wary of anyone offering more for nothing.

tx_tx

https://www.boards.ie/discussion/comment/120952856#Comment_120952856

Have a read through the PDF I posted earlier. It's a deposit contract between the third party bank and you. Raisin is named in it as an intermediary. The fact that you came to the third party bank through such or such distribution channel is certainly irrelevant as far as deposit guarantees are concerned.

You don't get more for nothing, you get more for lending to a small bank with a greater risk of default than others. They're offering more because they have to.

If you put in less than 100k, you'll get some kind of protection by the guarantee scheme, but they're designed to cover certain situations, so you'd still be exposed if, say, a big chunk of the Italian banking sector collapses. Regardless of what the scheme says, they won't be able to cover everybody's deposits.

Geuze

https://www.boards.ie/discussion/comment/120951859#Comment_120951859

As noted above, bond prices rise or fall daily.

In this case, I mean risk-free if held to maturity, when repaid by the Irish State.

tx_tx

https://www.boards.ie/discussion/comment/120953038#Comment_120953038

You still have an opportunity risk, then. You can get stuck with with a 2.7% ROI for several years, in a high inflation (and high rate) environment. Bond prices variations and this are just different expressions of the same underlying risk.

You're committing to a fixed ROI for a fixed period. You're betting that rates are going to fall or at least stay the same, and if they go up, you lose, one way or another.

What I mean is that you wouldn't be worse off selling your bond and taking your loss, only to reinvest in other bonds (same issuer, same maturity, etc) giving the yield the market is offering that day. It's an illusion that you can avoid the loss by not selling.

Viscount Aggro

I will take 1.5% interest for one year term, will be getting e200 per week interest.

I dont like the risk profile of the online banks.

Bobeagleburger

https://www.boards.ie/discussion/comment/120953247#Comment_120953247

€200 quid back post DIRT tax for a €20,000 fixed term of a year is abysmal.

Kintarō Hattori

Folks,

My partner and I were in the lucky position that we didn't need to spend our child benefit (we have 1 kid) and so over the last 6 years it's amounted to about €11k. I intend that we keep this secure for when/if she goes onto third level education. I'm afraid I'm a bit thick when it comes to the world of finance and I'm absolutely risk adverse. My intention is that the child benefit keeps getting paid into a savings account for her, so when she turns 18 there's a handy little nest egg to help cover her bills.

We had it paid into the 6 Year Childcare Plus plan which has now come to fruition:

https://www.statesavings.ie/our-products/childcare-plus-6yr

Are we best now moving what's there into this:

https://www.statesavings.ie/our-products/10-year-national-solidarity-bond

Many thanks for any advice.

tx_tx

https://www.boards.ie/discussion/comment/120953520#Comment_120953520

One of the key questions I would consider is the inflation and rates outlook for the next 10 years. Nobody has a crystal ball, so it comes down to deciding what kind of risk you're least uncomfortable with in that regard.

You're locking a tax-free 1.5% AER so let's speak of a 2.25% interest rate for 10 years.

On one side, it's a decent rate by today's standards, and you can only get it by committing for 10 years. (State savings let you get out early, but then the rate served would be much lower.)

On the other side, there may be a risk that the current expectation of inflation coming back down to around the 2% target by 2025 turns out to be incorrect, and that the consensus in a year or two is something else - maybe higher inflation for longer. If that risk worries you, it may be better to look for somewhere to put the savings for a year or two, and reassess the opportunity of a 10-year commitment at that point.

Jim_Hodge

https://www.boards.ie/discussion/comment/120953520#Comment_120953520

There are 3 and 5 year state savings options as well. We went that road and were very happy with the accrued compounded interest by the time we gave the funds to our children when they married. It's safe and tax free. Maybe not the best rate but do you want to risk the losses elsewhere?

Bobeagleburger

https://www.boards.ie/discussion/comment/120953520#Comment_120953520

I considered doing similar a few years ago until I did the maths.

In my case, it made much more sense to pay off the mortgage earlier, and put more money into a pension.

There's no point getting paid 1.5% per year in a saving account, while paying 2.5% or whatever to a mortgage. It's illogical.

Pay off debts, max the pension (take advantage of a big tax break), and then play with any extra cash left over.

If you're mortgage free,it's a different conversation!